
Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. That said, here is one small-cap stock that could be the next 100 bagger and two best left ignored.
Two Small-Cap Stocks to Sell:
Arhaus (ARHS)
Market Cap: $1.34 billion
With an aesthetic that features natural materials such as reclaimed wood, Arhaus (NASDAQ: ARHS) is a high-end furniture retailer that sells everything from sofas to rugs to bookcases.
Why Does ARHS Worry Us?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Modest revenue base of $1.41 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Incremental sales over the last three years were much less profitable as its earnings per share fell by 24.2% annually while its revenue grew
At $9.48 per share, Arhaus trades at 18.6x forward P/E. Read our free research report to see why you should think twice about including ARHS in your portfolio.
Concrete Pumping (BBCP)
Market Cap: $488.3 million
Going public via SPAC in 2018, Concrete Pumping (NASDAQ: BBCP) is a provider of concrete pumping and waste management services in the United States and the United Kingdom.
Why Is BBCP Not Exciting?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.4% annually over the last two years
- Earnings per share have contracted by 19.3% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Concrete Pumping’s stock price of $9.70 implies a valuation ratio of 32.3x forward P/E. Dive into our free research report to see why there are better opportunities than BBCP.
One Small-Cap Stock to Buy:
Federated Hermes (FHI)
Market Cap: $4.01 billion
With roots dating back to 1955 and a pioneering role in money market funds, Federated Hermes (NYSE: FHI) is an investment management firm that offers a wide range of funds and strategies for institutional and individual investors.
Why Do We Love FHI?
- 10.2% annual revenue growth over the last two years was better than the sector average, highlighting the value of its products and services
- Share repurchases over the last two years enabled its annual earnings per share growth of 21.1% to outpace its revenue gains
- Industry-leading 26.6% return on equity demonstrates management’s skill in finding high-return investments
Federated Hermes is trading at $56.35 per share, or 10x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
